Who might lead the Bank of England after Brexit?

Wednesday, January 10, 2018 - 11:30 AM

By William Schomberg, Huw Jones and David Milliken

Britain is expected to choose a new central bank chief this year to succeed Canadian Mark Carney, who will step down in June 2019, three months after the country’s scheduled exit from the EU. No one has yet thrown their hat into the ring to succeed him, but there are numerous contenders.

Widely tipped by analysts as Mr Carney’s most likely successor, Andrew Bailey reached the role of deputy governor of the Bank of England with a focus on banks before becoming chief executive of regulator the Financial Conduct Authority (FCA). During his time at the Bank of England, Mr Bailey helped to steer Britain’s banks through the global financial crisis, enhancing his reputation as a safe pair of hands.

However, heading the FCA — which roots out misconduct in Britain’s large financial services sector — is fraught with risks. The head of the British parliament’s influential Treasury Committee has criticised Mr Bailey for withholding parts of a report into alleged misconduct by state-owned RBS during the financial crisis. Mr Bailey has cited privacy restrictions.

As FCA boss, Mr Bailey sits on important panels at the central bank that oversee banks. Although he has never been an interest-rate setter, he once ran the Bank of England’s international economic analysis team.

Mr Bailey acknowledged the speculation about a move to the Bank of England in an interview published this week. “You’ll be unsurprised to know this question comes up reasonably often,” he said. “But I’ve got a job and, I have to be honest with you, I have never spent my time thinking about the one I want to do next.”

Ben Broadbent and Dave Ramsden are deputy governors for monetary policy and for markets and banking respectively, burnishing their credentials as potential successors to Mr Carney.

Mr Broadbent, a former Goldman Sachs economist who once trained as a classical pianist, is respected for his economic analysis but has less experience on banking oversight, which has become an important part of the governor’s role.

Mr Ramsden only joined the central bank in September although he is no stranger to the Monetary Policy Committee having attended 92 of its meetings in his previous role as the Treasury’s chief economic advisor.

The two other Bank of England deputy governors, Jon Cunliffe and Sam Woods, are less likely contenders. Mr Woods focuses mostly on bank regulation while Mr Cunliffe — a former British ambassador to the EU — would be aged 66 at the start of the term which usually runs for eight years, although Mr Carney has chosen to step down after six.

The central bank’s chief economist, Andy Haldane has developed a reputation for floating unconventional ideas, including the abolition of cash as a way to give central banks more muscle over the economies they run.

In 2012, he praised the anti-capitalist Occupy movement for suggesting new ways to fix the shortcomings of global finance. Mr Haldane has experience of both sides of the Bank, having served previously as executive director for financial stability, overseeing the risks to the economy from the banking system. But he might be seen as too much of a maverick to take the job of governor.

The announcement of Mr Carney, the first non-British governor of the Bank in more than three centuries, was a surprise. Should Britain’s finance minister Philip Hammond also opt for a less obvious candidate, one name that has appeared in Britain’s media is that of Sharon White, the head of a telecoms regulator and who previously worked at the Treasury.

The daughter of Jamaican immigrants, she has won wide praise for her high-profile roles in the public sector. Another outside contender would be Adair Turner, a former chairman of a now defunct financial services regulator who was in the running last time around. He continues to speak about the British economy and has warned of the risks from high debt levels.

The prospect of the Labour Party taking power in the next year or so is remote but investors are mindful that Theresa May has only a small majority in parliament after last year’s failed election gamble and her Conservative Party is split over how to leave the EU.

Labour leader Jeremy Corbyn and his would-be finance minister John McDonnell have proposed that the Bank of England should fund investment in infrastructure, a big change from its current focus on inflation.

If they were to pick the next governor, they might consider former members of an economic advisory committee which included US academic and Nobel Prize winner Joseph Stiglitz and Ann Pettifor, a British economist who is an austerity critic.